Commerce Pick Richardson Withdraws, Citing N.M. Probe

By Michael D. Shear and Carol D. Leonnig
Washington Post Staff Writers
Monday, January 5, 2009

New Mexico Gov. Bill Richardson, chosen by President-elect Barack Obama to be commerce secretary, withdrew from consideration yesterday, citing an ongoing federal "pay-to-play" investigation involving one of his political donors as a significant obstacle to his confirmation.

Richardson, 61, who competed unsuccessfully for the Democratic presidential nomination last year, becomes the first political casualty in Obama's Cabinet, and his withdrawal marked the first visible crack in what had been one of the smoothest presidential transitions in modern history.

The former energy secretary and U.N. ambassador under President Bill Clinton was positioned to become the highest-profile Hispanic in Obama's administration. But Richardson made it clear yesterday that he thought confirmation was far from a sure thing, even with Democrats firmly in control of the Senate.

"Given the gravity of the economic situation the nation is facing, I could not in good conscience ask the President-elect and his administration to delay for one day the important work that needs to be done," Richardson said in a statement.

The New Mexico investigation, which began last summer, focuses on whether Richardson's office urged a state agency to hire a California firm as a result of generous contributions from the company and its president to political action committees established by the governor.

Richardson insisted that he and his staff "have acted properly in all matters" and predicted that the investigation would exonerate him. But he said the probe could take weeks or months, potentially holding up his Senate approval. Instead, Richardson said he will remain "in the job I love as governor of New Mexico."

He called Obama on Friday to advise him of his plans, and the president-elect accepted the decision "with deep regret," according to a statement issued yesterday. Aides said no one in Obama's transition pressured Richardson to drop out.

No clear replacement for Richardson at the Commerce Department emerged yesterday, but sources close to the transition said Obama would move quickly to find one.

A grand jury in Albuquerque is looking into whether CDR Financial Products received a contract with the New Mexico Finance Authority because of pressure from Richardson or other state employees. CDR made $1.48 million advising the authority on interest-rate swaps and refinancing of funds related to $1.6 billion in transportation bonds, state officials confirmed.

The Beverly Hills-based firm and its president, David Rubin, together gave $100,000 to Sí Se Puede and Moving America Forward, both PACs started by Richardson, shortly before winning the lucrative state contract, records show.

The federal probe heated up considerably last month, just around the time Obama announced Richardson as his choice for commerce secretary, according to sources familiar with the investigation. New subpoenas were issued, and testimony was scheduled from officials at J.P. Morgan Chase who worked for the state with CDR and from the director of Richardson's political action committees.

CDR's selection drew FBI interest because the firm did not make an initial list of the most qualified bidders. The bidding was reopened for review, and a state committee headed by one of Richardson's former top aides later helped select CDR.

A legal source familiar with the investigation said yesterday that FBI agents, working on the Senate's behalf and conducting a background check of Richardson for the Commerce job, conveyed to Obama's transition team the seriousness and significance of the Albuquerque grand jury probe.

The agents are said to have communicated that the governor's top aides -- and even Richardson's actions -- were under scrutiny. At least two sources familiar with the investigation said some evidence raises concern about the propriety of the Richardson administration's interactions with a donor.

Obama aides declined to comment on any conversations the transition team may have had with the FBI about the investigation.

The inquiry springs from a long-running nationwide investigation by the Justice Department into "pay-to-play" practices in local government bond markets. Federal investigators are questioning whether financial firms have lavished politicians with money and gifts in exchange for high fees on work advising municipal and local governments on investments.

In mid-December, Richardson spokesman Gilbert Gallegos said the governor was "aware of questions surrounding some financial transactions at the New Mexico Finance Authority" and expected state officials to cooperate fully.

CDR's attorney, Richard Beckler, declined several weeks ago to elaborate on the investigation, but he told a Washington Post reporter Dec. 15 that the company "has always tried to abide by these byzantine campaign finance regulations and is cooperating fully with this investigation."

The suddenness of Richardson's withdrawal renewed questions about the Obama team's vetting procedures. The New Mexico investigation had been publicized since the summer, yet aides to the president-elect said yesterday that they were not aware of the matter when Richardson was nominated. Richardson advisers insisted that the governor had relayed information about the investigation to transition officials before his name was announced.

"I think our vetters have done a good job," incoming Obama press secretary Robert Gibbs said last night, crediting the "impressive . . . totality of our Cabinet picks."

A senior transition aide said yesterday that Richardson had assured the team that he would emerge unscathed by the investigation and that there was no reason to think otherwise. "But it became clear that confirmation hearings would have to be delayed until the investigation was complete and that would take six weeks or, perhaps, longer. Governor Richardson concluded that this was too long, and he decided to withdraw," the aide said.

Gallegos, the Richardson spokesman, said yesterday that the governor considered asking Obama to delay sending his name to Capitol Hill until the case was concluded.

"He was hopeful that his name would be cleared and it would be wrapped up before his confirmation," Gallegos said. Over the weekend, when it became clear that would not happen, Richardson decided to withdraw, Gallegos said.

Obama praised Richardson yesterday and said that he looked forward to having the governor serve his administration in some capacity.

Staff writer Chris Cillizza contributed to this report.

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